It all started on November 18, when The New York Times published an article by Nathaniel Popper and Nelson D. Schwarz headlined, Investors Rush to Beat Threat of Higher Taxes. Much of the discussion was about tax increases that would take place in 2013 if the fiscal cliff curb is not averted, but the article quoted a woman in McLean, VA who is deeply concerned about what will become of her business if President Obama’s tax proposal is enacted.

Kristina Collins, a chiropractor in McLean, Va., said she and her husband planned to closely monitor the business income from their joint practice to avoid crossing the income threshold for higher taxes outlined by President Obama on earnings above $200,000 for individuals and $250,000 for couples.

Ms. Collins said she felt torn by being near the cutoff line and disappointed that federal tax policy was providing a disincentive to keep expanding a business she founded in 1998.

“If we’re really close and it’s near the end-year, maybe we’ll just close down for a while and go on vacation,” she said.

Either Popper and Schwartz do not understand Obama’s proposal or they simply chose not to call Ms. Collins’ attention to her error–or perhaps they’re just media hacks. A number of bloggers responded with derision. Here’s Dave Wiegel:

How do you get to be as rich as the people in this New York Times story without ever figuring out how taxes work? [….]

You see these idiots every time a tax hike becomes possible again. They have no apparent idea how marginal rates work. Right now, if her and her husband make $250,000, they pay at most a 33% tax on some of that income. If they made $251,000, they would have to pay the same rates for everything except that last $1000 — that, they’d be taxed at 35%. If the rates increase across the board that top rate becomes 39.6%.

Derek Thompson argues that the NYT journalists should have at least gently explained to Collins that she was confused about the way tax rates work.

Their analysis is basically sound, except for the fact that it is not quite true. They have forgotten to look at deduction phaseouts, surtaxes, and the AMT, which are not taxes on marginal income.*

No matter what you have heard on the internet, there are in fact a lot of sizeable marginal inflection points for high earners. There are the Pease deduction phaseouts, temporarily abated by the Bush tax cuts but scheduled to go back into effect in 2013, which can eliminate up to 80% of deductions for couples who make more than about $175,000 (the number is indexed for inflation, so it changes every year): your deductions are reduced by 3% of the amount by which your income exceeds the threshhold. The student loan interest deduction phases out at $150,000 ($75,000 for singles). And a lot of tax-free savings opportunities disappear: educational savings accounts and IRAs have income limits, so your ability to use them starts phasing out in the low-six-figure income range. So do various educational and child tax credits. These things obviously aren’t a huge deal for people who make $1,000,000 a year but they can be a huge tax hit for couples in the $150,000 to $300,000 range. Come 2013, they will be an even bigger hit.

And we haven’t even discussed the AMT, which virtually eliminates deductions for couples who make the mistake of doing things like buying a house, having children, or living in a high tax state.

McArdle provided this chart:

I have to be honest, I’m not going to spend a lot of time worrying about people as wealthy as the ones McArdle is freaked out about. But in any case, Kevin Drum took note of the issue McArdle raised in a follow-up to his earlier post. He agreed that there are complex issues for people in the upper income brackets.

None of this really affects our discussion of people with incomes over $250,000, but it does illustrate the fact that moving across a phaseout line can sometimes have a significant effect on your taxes:

For example, a married couple filing jointly in 2013 with two kids at home and one in college who go from making $100,000 to $125,000 loses a $2,000 child tax credit and $1800 worth of HOPE credit, an increase of almost 4% in their effective—not marginal—tax rate. The marginal tax rate on their extra earnings is 15.2% just from deduction losses; that comes on top of the 28% they’ll be paying the federal government in income taxes, and whatever state income tax they owe.

I don’t have any real point to make here. I just wanted to acknowledge that my income tax chart only showed one piece of the picture. It’s the most important piece for most people who earn under $1 million (above that, investment taxes tend to become more important), but there are still plenty of little gotchas in the tax code that can have funny effects as they phase in and out.

Democrat and former Michael Dukakis campaign manager Susan Estrich is very upset that the presidential candidate whom she supported actually is intent on raising taxes on the rich — which, lo and behold, includes her. She complains: “I did not vote for Obama because I think I am paying too little in taxes. Like many people I know, I am ‘rich’ by Obama’s standards. I pay more taxes, percentage wise, than Mitt Romney and Warren Buffett, because I earn virtually every penny of my income. I work. And yes, all those deductions that allow the truly rich to not work, or at least to not work all the jobs I do, make me angry.”

She means she earns mostly ordinary income as opposed to capital gains, but you see her point — who the heck is Obama to tell a hardworking upper-middle class gal she’s not paying enough in taxes?!

I have no idea how much Susan Estrich earns, but if it’s all ordinary income, then she’d pay the same amount as before on the first $250,000, right? And she’d pay a few percentage points more on anything she earns over that amount. Big f&cking deal!

More from Rubin:

If you live in New York or Los Angeles and have an income of $250,000, two kids and a house in a nice but not ostentatious neighborhood, you are not living a lavish lifestyle and you already pay gobs and gobs in taxes. You didn’t inherit wealth and you worked hard in college and in your profession, only to find yourself living paycheck to paycheck. And now, you’re going to get socked with a tax hike.

Not if it’s all ordinary income (i.e., “paycheck to paycheck.”) And if a family with an income of $250,000 is living “paycheck to paycheck,” they need to work on a budget. I didn’t inherit wealth and I worked my ass off in college too. So did millions of other Americans. Big f&cking deal! If you need more, get a second job.

Even more:

For years Republicans have been warning that the Obama-size of government will require much more than taxing the “rich.” That means not only the $250,000 earners (say, a white-collar professional with a mortgage, college tuition bills and a mother in long-term care) but the $80,000 earners (say a teacher in Massachusetts with a cramped condo, an old car and kids) also are going to be told they have to pay even more of their income to the federal government.

Newsflash for Rubin–you can do better than a cramped condo on $80,000 in Massachusetts–and that would be on the high end for a public school teacher. But Obama’s plan wouldn’t increase taxes on someone making $80,000 as salary income anyway.

To these whiny rich people and concern troll media hacks, I say tough shit! The average income in this country is a little over $50,000. Plenty of those people have parents in long term care–or are caring for them at home. And plenty of poor people have the same problems.

Obviously the White House needs to get busy educating the public as well as the lazy corporate media about how the tax system works and exactly what Obama’s tax proposals are. And hacks like Jennifer Rubin especially should be fired. As long as the Washington Post keeps this hack among hacks on staff, it cannot be considered a serious newspaper.

Feel free to use this as an open thread. I know most people are gearing up for Thanksgiving. I’m another one of those people who don’t really like the holidays.

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22 Comments on “Whiny Rich People and Media Hackitude”

Today was the last straw for me with Jennifer Rubin, especially after the asinine post she wrote yesterday: Where will the Dems Go?

More to the point, without Obama, and more important, without Romney, what do and will Democrats believe in? Big government and debt? We really don’t know since Obama has run two races about nothing, and aside from climate control (anti-coal and gas production) and tax hikes on the rich, we don’t know much about his economic agenda or whether there is something approaching an economic revival agenda.

The challenge for the Democratic Party, as opposed to that of the president, is to figure out if it can win presidential elections without bogeymen and attract the broader coalition that Obama cobbled together in 2008 when he had the luxury of running as a blank slate.

The party of Cuomo or of Illinois Gov. Pat Quinn? Do Democrats want to bring California and Illinois to the rest of the country, or now Sen. Mark Warner’s Virginia’s model? The party is short on governors and stuck with a Senate bent on doing as little as possible. Republicans have begun thinking about where they want to go and will later get to who they want to want to take them there. As Obama’s lame duck-ness sets in, Democrats will need to do the same.

Really? Dems are short on Governors? What about Deval Patrick. And he’s black–so maybe black people will vote for him. What about Martin O’Malley and Christine Gregoire? But in Rubin’s twisted mind they can’t compare with Bobby Jindal?

$250,000 is quite a lot of money even in (gasp) New York. If you don’t own a place in the city, and are determined to live within your means, there are a lot of options for you to pursue. With our amazing public transportation system, it’s not necessary for people who work in NYC to live there. I guess Jennifer wouldn’t deign to take the train/bus/commuter rail, but most of us are fine with it.

It is laughable that she thinks people at that level are living paycheck to paycheck. Sure, if they own property they are paying a lot of property tax, but if they are at all responsible about their finances, they should be able to handle it just fine.

$250k is a lot of money anywhere in the U.S. That is 5x more than I made in my best income years (working 20+hrs a week OT or working 2 jobs), and I raised 3 children, with no child support and no govt assistance. Most Americans will never know what it’s like to make $250K a year, so all the whining and hand wringing over their tax rates is a big fucking joke to most of us.

And I agree that if someone is making that sort of money and living paycheck to paycheck, they have major personal budgeting issues. Maybe they should eat out less, buy a smaller home or rent a cheaper apartment, buy less expensive vehicles, quit the Country Club, take smaller vacations or no vacations, buy fewer hi-tech toys. Or perhaps they should hire one of us regular people who supports a family of 4 or more on a fraction of $250k to manage their damned money.

Or perhaps they should hire one of us regular people who supports a family of 4 or more on a fraction of $250k to manage their damned money.

Brava, AnonOMouse! Well-said. I have one of those very poor money managers in my family (not that he ever made $250K by any means, but he made a lot more than most) and it’s incredibly frustrating to me that he is in his current situation. There was a lot he could have done to avoid it if he had made better financial decisions.

Mouse – Brava. 250K was just over 4 years salary for me, but I didn’t live high on the hog. As you mentioned, I had kids, no support from their father, was paying for a mortgage (to give my kids stability and a sense for being from somewhere) and working approximately 60 to 70 hours per week. Great times – not. Also, I had to report to the arseholes who made 250K per year and try to correct their amazingly stupid endeavours to make themselves more money while screwing the public so they could make more money. Vultures is too kind a word and probably insulting to vultures.

Ain’t that the truth, HT. Those were very challenging years, much more difficult that I realized at the time. It’s amazing how much clearer things are in retrospect than they are in realtime. I wouldn’t go back to those days for anything. Once was enough for me!!!!

I think it’s great somebody FINALLY posts actual numbers. However, posting numbers only when it is convenient for one’s position isn’t fair. The entire pension discussion has been devoid of discussion of actual pension numbers because in that arena, the numbers may not work as well for democrat positions.

Citing “Numbers of convenience” only when it supports a political position is why there is so much polarization in the political arena.

Nobody gets pensions anymore, the great 401k hoax (we’ll match you up to 3%) that was perpetrated on the great middle class did away with that. We don’t get golden parachutes and stock options and big bonuses, and retirement packages and buy-outs and corporate perks, we get off-shored, out-sourced and layed-off in appreciation for all of years of hard work and dedication.

All of the hand wringing and panic attacks over taxes is nothing more than the upper crust getting nervous that their days of excessive salaries and bonuses and tax avoidance at the expense of the middle class is coming to an end.

These people are truly unbearable. If it’s so hard to get by on $250,000, how about getting by on $50,000? Who is in a better position to fork over some extra moolah? Are you kidding me? My heart does not bleed for these overpaid brats. And their lack of empathy is quite shocking.

People who make over $250K actually think they work “hard” for that money and the rest of us don’t. They really do not know what actual hard work is. Making less than $50K trying to support a family is “hard work”. Those making more than $250K “not so much”. They really have no clue.

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